George Osborne has warned that Britain's prospects for economic recovery are being ‘killed off’ by the crisis in the eurozone. Photograph: Chris Ratcliffe/PA

George Osborne's claim that the UK's economic recovery is being "killed off" by the eurozone crisis has come under fire from his own party, as the chancellor prepares to set out crucial banking sector reforms intended to avoid a repeat of the 2008 bailouts.

As markets were poised to react to the €100bn (£81.5bn) bailout of Spain's banks, the chancellor's claim was criticised by Conservative MP Douglas Carswell. In his blog, Carswell, a regular critic of government economy policy, said that an "absence" of domestic economic reform was the cause of "awful economic performance".

With analysts expecting the world stock market to provide a cautious welcome to the financial assistance aimed at Spain's banks, some of the UK's banks are bracing for a downgrade of their credit ratings – possibly this week – as a deadline for a review by the Moody's agency of more than 100 financial institutions draws near.

The Royal Bank of Scotland, 83% which is owned by the taxpayer, has already warned that a one notch downgrade by a ratings agency could cost it £12.5bn although analysts said that markets had been well prepared for any downgrades to the UK major banks.

Osborne this weekend warned in the Sunday Telegraph that the UK's economic recovery was being "killed off by the crisis on our doorstep". This prompted the latest outburst by Carswell – who argues the UK's trading partners would be better off leaving the euro – which was seized upon by Labour. "When even the government's own backbenchers think George Osborne has got it wrong on the economy it is time he finally listened and changed course," said shadow Treasury minister Chris Leslie.

Osborne's Mansion House speech is expected to set out how the implementation of the recommendations of the independent commission on banking, chaired by Sir John Vickers, will solve the problem Britain faces in having big banks that can put the economy at risk.

It comes as banks are being readied for bail outs in Spain following the agreement on Saturday by eurozone finance ministers to lend up to €100bn to the country's bank bailout fund. There are warnings, however, that if any loans are supplied from the European Stability Mechanism, the original bailout fund, eurozone governments will be repaid ahead of private sector creditors.

Mike Ingram, market analyst at BGC Brokers, said stock markets were likely to react positively but that the details of the deal would be nervously awaited.

The crisis in Europe has sparked concerns over "contagion" as investors fear the problems of one country will spread across the region as they did during the Asian financial crisis in the late 1990s.

Ingram said: "It's fairly clear that the risk of contagion is lessened by this move. But it's unclear whether it's going to give more time for something more horrible to develop further down the road." He said new austerity measures could hamper any long-term recovery.

So far few details of the Spanish deal have been released. Spain's prime minister Mariano Rajoy has said the deal was done without any new austerity measures, like those imposed on Greece which have led to riots and political crisis.

But the details of the deal are yet to be disclosed while a report commissioned by Spanish government into the scale of the hole in Spain's bank has yet to be delivered. The International Monetary Fund on Friday estimated €40bn would be needed while analysts at RBS reckon as much as €134bn could be required in the next three years.

Jack Ablin, chief investment officer with Chicago-based Harris Private Nank said any move to end uncertainty was likely to be positive. "The continual drip of uncertainty is the worst possible situation," he said.

In the US, the Dow Jones stock market index made its largest weekly percentage gain of the year last week as president Barack Obama called on European leaders to act swiftly to contain the crisis.

Obama and Federal Reserve chairman Ben Bernanke have also called the "headwinds" from Europe a serious threat to the US's fragile economic recovery. But some analysts have argued that the US is "decoupling" from Europe and could escape the worst of a European crisis.

Lance Roberts, chief executive of Streettalk Advisors, said the news should lead to a "short-term rally" in US stock markets. "The problem is it doesn't solve anything and it creates new problems," he said.

"If the bailout truly comes without strings, you can expect Greece and Ireland to want to renegotiate their loans."